Auditors should communicate professional scepticism to client before premature reporting to regulators — SERBADK (5279): SERBA DINAMIK HOLDINGS BHD
KUALA LUMPUR (June 25): Serba Dinamik Holdings Bhd, whose share price dropped to a fresh record low of 46.5 sen this morning, issued a statement late last night to reiterate again its stance that its former external auditor KPMG PLT had in fact committed a breach of contract, and that the latter should have communicated its professional scepticism to the client instead of prematurely reporting it to the regulators.
In a response to the media releases issued by the Securities Commission (SC) and Bursa Malaysia, the oil & gas firm also restated its stand that KPMG had raised the red flags on the group's auditing issues in an inappropriate manner.
Serba Dinamik was referring to KPMG's decision to go to the SC last month with its audit red flags in the company’s books for the 12-month period ended Dec 31, 2020.
Following that, the SC announced in the first week of June that it had started investigations into the matter in regards to the dispute between Serba Dinamik and KPMG over the handling of the audit issues, and that it had secured documents and records from Serba Dinamik to assist its investigations.
"We thank profusely both institutions (the SC and Bursa Malaysia) for alerting us of the law in relation to auditors’ obligation in reporting to SC.
“We however wish to point out that auditors in performing that duty have the highest onus to exercise that professional opinion, that there has in fact been a breach or non-performance of the identified laws, not a mere reasonable belief on their part that, that was so.
"We also accept the advice by the two esteemed institutions, with gratitude, that auditors can exercise some elements of professional skepticism during their audit, but this mere skepticism must be communicated to their clients for resolution of the matters, and mere skepticism is not sufficient for auditors to pre-maturely report, to the detriment of the company and the market," Serba Dinamik said in a press statement dated June 24.
The statement was released after the announcement that KPMG has quit as Serba Dinamikc’s external auditor citing reason as it could not discharge its duty independently.
In the statement, Serba Dinamik also highlighted that it has never claimed that its newly appointed chairman Datuk Mohamed Ilyas Pakeer Mohamed has “officially communicated with either institutions”, namely Bursa and the SC.
"We thank the Institutions for not delving into the facts of this case, which facts are still at large," it added.
To recap, Mohamed Ilyas during the press conference on Tuesday claimed that he had previously spoken to SC and Bursa Malaysia about KPMG's alleged breach of contract and non-performance.
Both the SC and Bursa Malaysia later denied such a meeting with Mohamed Ilyas.
The commission pointed out that auditors should be allowed to carry out their responsibilities and render their independent opinion without fear or favour, and discharge their duties free from any retaliation after Serba Dimanik has filed a lawsuit against KPMG.
The audit issues, which were revealed to the public late last month, has wiped off more than RM4 billion market capitalisation from Serba Dinamik. Its share price has plunged from RM1.61 prior to the news to below 50 sen currently.
KPMG highlighted discrepancies involving transactions to the tune of RM4.54 billion to the company's independent directors last month.
Institutional shareholders, such as the Employees Provident Fund (EPF) and Kumpulan Wang Persaraan Diperbadankan (KWAP) have both cut their stake in the company.
At the time of writing, shares of Serba Dinamik fell six sen or 11.2% at 47.5 sen with a market capitalisation of RM1.77 billion.
http://www.theedgemarkets.com/article/auditors-should-communicate-professional-scepticism-client-premature-reporting-regulators-%E2%80%94
